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Nick Clegg meets Richard Thaler: ‘All it would take to stop Brexit is a couple of dozen brave Tories’

December 3, 2017 1:52 PM
By Dorian Lynskey in The Guardian

Nick CleggThe former deputy PM and the Nobel prize winner discuss the EU, business and Trump

Richard Thaler was awarded the Nobel prize for economics in October, for work that has "built a bridge between the economic and psychological analyses of individual decision-making". While traditional economics assumes that people are rational actors, Thaler explores the consequences of irrationality, bias and error, and proposes ways that governments, through mechanisms as simple as changing the phrasing on a form, can encourage, or "nudge", smarter decision-making. Nudge, the 2008 bestseller he wrote with Cass Sunstein, introduced the influential concept of "choice architecture", while his 2015 book Misbehaving was a personal history of behavioural economics. As the author Michael Lewis put it, he's "the economist who realised how crazy we are".

Nick Clegg, meanwhile, is adapting to life outside Westminster. He was leader of the Liberal Democrats between 2007 and 2015, deputy prime minister in David Cameron's coalition government and MP for Sheffield Hallam for 12 years, before losing his seat to Labour in the last election. He has written a memoir of his time in government and, more recently, a passionate polemic, How To Stop Brexit (And Make Britain Great Again).

Clegg has long been a fan of Thaler's work. The coalition set up the behavioural insights team, AKA "the nudge unit", which applied Thaler's theories to policy areas such as tax, the NHS and charitable giving, with palpable results: one nudge-influenced scheme has added about 100,000 organ donors to the register every year. The two men also share a grim fascination with the psychology behind the upheavals of Brexit and the election of Donald Trump, and the abiding consequences of the 2008 financial crisis. Calm and curious, they are problem-solvers by nature.

The conversation takes place over Skype, when they are both at home: Thaler in Chicago, where he teaches at the Booth School of Business; Clegg in London. Away from frontline politics, Clegg is strikingly relaxed and good-humoured, dressed casually to take his sons to play football after school. A generation older, Thaler speaks with the languid authority of the distinguished academic. And there is much to talk about. Dorian Lynskey

Nick Clegg Well, firstly, congratulations. Having a Nobel prize is pretty extraordinary and rare and amazing.

Richard Thaler All of the above, but it's been such a blur.

NC Do your colleagues treat you differently?

RT No. Especially at the University of Chicago, we treat everybody the same. Like shit.

Obama had two laureates on his team. Trump's is a fact-free White House

NC Well, I guess there's a certain equality in that. What were the ceremonies like?

RT They're yet to come. It's nine days in Stockholm. They get their pound of flesh. There was a [Nobel] event at the Swedish embassy in Washington DC, the highlight of which is normally a visit to the White House. It was scheduled on a day when Trump was on his way back from Asia and I think it disappointed no one - neither Trump nor the laureates.

NC Are there any big thinkers in the Trump administration? Where is the intellectual ballast coming from?

RT The White House and the executive office building are half-full. There are no economists of the standard that both Republican and Democratic presidents have had in their council of advisers over the last 30 years. Obama had two science Nobel laureates on his team. I don't know of any scientist who's been hired by this administration, and in fact they're firing them left and right from the Environmental Protection Agency. It's a fact‑free administration.

NC Can you nudge us all away from Brexit, please?

RT God knows what to do now.

NC Referenda, I take it, are inimical to everything that behavioural economics believes in, because it compresses so many things into a crude yes‑or-no moment.

RT I think it's clear that very few, if any, leave supporters did anything equivalent to running a spreadsheet. It's what my friend Danny Kahneman would call a System 1 vote. I was in the UK quite a bit right before the referendum, and it feels very much like Brexit voters and Trump voters are cousins. They're angry and it was an expressive vote. Then what? I think the game wasn't lost at that point. It certainly would have been reasonable to say: "Let's go see what kind of deal is on offer and then have a second referendum."

I don't think I would have even triggered article 50 without substantial prior negotiations about what was on the cards. It's clear that the UK cannot possibly expect a friendly deal.

NC You're right on all counts. The thing that is starting to worry me more than anything else is: where does the rage go? Where does the rust belt rage go in America, when building a wall against the Mexicans does not lead to jobs being restored? Where does the legitimate rage among Brexit voters go when they discover that Brexit does not deliver paradise? The worry is that we get into a spiral where one wave of populism begets the next, don't you think?

RT There may be a wake-up call for many of the voters who switched from Obama to Trump if this Republican tax bill passes, because the distributional consequences of that bill are staggering. To give you an example, there's a subsidy for private jets, but the bill taxes the waiver of tuition that graduate students get. Why on earth would we put that kind of tax on people who are going to be the future of everything?

NC Here, you've got a curious thing. Of course, there was a grassroots eruption of sorts on 23 June 2016, but so many of the vested interests that lined up behind Brexit are profoundly elitist. It's a curious marriage of understandable widespread discontent with the status quo after 2008, and a really small bunch of people with a lot of money and a lot of power who intervened to push the whole debate in a direction that suits their ideological needs. Is that also something you feel in the Trump phenomenon?

RT Absolutely. Look, 80% of Republicans still support Trump, which is kind of astonishing.

I am trying to process a conflation of Homer Simpson and Nigel Farage

NC The pulling apart of the generations becomes ever more acute. Here in the UK, asset wealth is almost entirely in the hands of the old, and the young don't have much of a chance to get their feet on the property ladder. The polarisation of the generations is having a huge effect on politics as well. I wonder how we can nudge folk above a certain age to make decisions that make sense for the younger generation, too? Lots of grandparents voted in the Brexit referendum in a way they knew was not welcomed by their own grandkids. I don't understand that. Do you?

RT Well, no. Like I say, I think that vote was expressive. Think of Homer Simpson and how he would vote. There's a famous Simpsons episode, which we quote in Nudge, where Homer is angry about something and wants to go buy a gun to shoot whoever he's mad at. He goes to the store and he's told there's a five-day waiting period. And his reaction is: "Five days? But I'm mad now!"

NC [Laughs.] Brilliant. My mind is trying to process a conflation of Boris Johnson, Nigel Farage and Homer Simpson.

RT Yeah. Mix all of those together and compare them to Spock. People were not voting like Spock. And that's really the message of behavioural economics. These kinds of decisions are too hard.

NC One thing I'm intrigued by is this increasing conflict between Silicon Valley and public opinion - everything from whether they pay enough taxes to fake news, extremists, monopoly power, you name it. Are you optimistic or pessimistic about tech? Because there's such an appetite at the moment to think of it as a force for bad.

RT Most technology we just don't understand, but we don't want to give up the phone in our pocket and all the other things that have changed our lives so dramatically in the last decade. Personally, I don't view Silicon Valley as a force for evil. Certainly, it's right to be concerned about privacy issues. If you combine what your cellphone provider knows about you with what Uber and Amazon and Google know about you, well, I suppose it could be a force for less misbehaving. [Laughs.] I can understand people being fearful of that, but I don't think any of those people are really interested in spying on us. They're certainly interested in knowing that we're walking down the street and we like hi-tech espresso and there's [a coffee shop] coming up in two blocks. Is that bad? Not necessarily.

Here's a contrast. One of the problems we face in the US is we have too many choices in healthcare providers. Competition is good, but people are horrible at making complex choices. At the same time, if you go to Amazon, there are three million books for sale and you have absolutely no problem finding the one you want. If you don't know what you want, they'll have 10 recommendations for you. So, there's all kinds of potential help in terms of choice architecture, as we call it. I think there is lots of room for governments to improve the way they interact with their citizens and help them make better choices.

NC In the coalition, we set up the nudge unit, which you inspired, and the stuff we did on auto‑enrolment in pensions made so much intuitive sense to me. Which areas of policy do you think are most susceptible to similarly transformative interventions?

RT People greatly misunderstand the nudge agenda, possibly because of the word. It was a great book title, but possibly not the best name for a movement. When we wrote that book, we did not expect a movement. People think of it as bureaucratic nannying. The analogy I like is GPS. If I'm wandering around without Google Maps, I might never make it to where it is I intend to go. But they don't choose my destination - if I'm following my route and see something interesting, it doesn't say: "No, don't go there." It recomputes. Nobody objects to life being easier. We're all lazy.

I can tell you for sure that Brexit will not make life easier for Brits, right? We can think of 100 ways it will make things worse. One thing we haven't talked about is this attitude towards immigrants. As someone who's been coming to London for many years, I can tell you that immigrants have made London spectacularly better in every possible way.

NC The irony, of course, is that, in areas like London, where immigration is at its highest, the Brexit vote was lowest, and in some parts of the country where the foreign-born population is lowest, the Brexit vote was the highest.

Years ago, before I became an MP, I was knocking on doors in Chesterfield, Derbyshire - this was at the height of the controversy about asylum seekers being dispersed around the country when Tony Blair was in power. The tabloid newspapers were going nuts about it every day. I remember speaking to a guy leaning on the fence outside his house and saying: "Any chance you'll vote for the Liberal Democrats?" And he said: "No way." And I said: "Why not?" And he said: "Because of all these asylum seekers." And I knew for a fact that not a single asylum seeker had been dispersed to Chesterfield. So I said to him: "Oh, have you seen these asylum seekers in the supermarket or the GP's surgery?" And he said something to me that has remained with me ever since. He said: "No, I haven't seen any of them, but I know they're everywhere." You can't dismiss the fear, but how on earth are you supposed to respond to that?

RT Right. And the flipside of that is that once you get to know the people you're afraid of, all of a sudden they become de-villainised. Think about the changes in attitudes about same-sex marriage that have happened in the last decade. I think it's because, as more gay couples came out of the closet, people started to realise that many of their neighbours and co-workers are gay and nothing to be afraid of, and that changes attitudes.

NC It's an enduring truth, isn't it, that if you look someone in the eye it's very difficult to hate them. Look at the behaviour of drivers. When you're trying to get into a queue of cars, if the drivers can look past you, they can cut you right off. The moment they catch your eye, they let you in.

RT Right. So, Nick, is there any hope for a sensible resolution of Brexit?

NC Yeah, there is, Richard. Definitely. I'm not going to pretend that I think it's the most likely outcome, but I think it's a more probable outcome than I feared some time ago. There is no way out of this cul-de-sac that does not start with MPs saying to the government in a year's time: "Thanks for all the work you've done trying to cobble a deal together, but this is so far removed from what our constituents were promised." I think there is a growing chance that enough MPs will pluck up the courage to say, just on democratic principle, that they should not give their consent to a deal that is so completely different from what people were led to expect.

Maybe the hope is the model of Mr Macron across the channel. A third party. Nick! Now's your time.

Jeremy Corbyn is famously ambivalent or antagonistic towards the EU, but the Labour party itself, in terms of its membership, has become a staunchly pro-European movement. And if I was a young Conservative MP, I would be terrified that this Brexit obsession is trashing the Conservatives' long-standing reputation for being a level-headed, competent party of management. That's what the Tory brand has been for generations. The Conservative party is the most successful party in the democratic world, precisely because their reputation is that they don't go nuts and become ideologically zealous. So, I'm a little more optimistic that MPs will have the courage of their convictions in a year's time.

RT Yeah, well, it may be too late.

NC I don't think so.

RT You think if the UK goes back to the EU and says "Just kidding"?

NC I think if the UK said: "Look, sorry, we've screwed up and we didn't really mean it," there would be a lot of shaking of heads in Brussels, Paris and Berlin. But I know a lot of the people involved in these negotiations. They find British behaviour perplexing and they've long found Britain's ambivalence towards the EU exasperating. But they know it doesn't make sense for a country as big as the United Kingdom to sail off into the mid-Atlantic. There might be some hotheads who will say: "We're better off without Britain, come hell or high water," but I think most of the grownups would say: "If we've got a chance to patch this up, we should grab it."

RT I completely agree. I think courage is the key word. I think the same is true for Republican members of Congress. Some of them are going to have to stand up for what they know in their heart is right. They're afraid of being challenged in a primary. But all it would take is five senators to stop everything in its tracks.

NC And all it would take here is a couple of dozen brave Conservative MPs. I was often criticised - rightly, I'm sure - for being either reckless or naive about the importance of maintaining your own political reputation, but some MPs are so worried about their immediate career prospects and whether they're going to be popular with this or that faction. My God, what is that compared to charging over the cliff of Brexit? What's the point of being an internationalist, progressive MP if you're prepared to lock yourself into Brexit?

I remember hearing Margaret Beckett in the debate a year ago about the triggering of article 50. She said: "I believe this will be catastrophic for my constituents, but nonetheless I feel duty‑bound to vote for it." What kind of representative democracy is that?

RT I think it's crazy. So, look, maybe the hope is the model of Mr Macron across the channel. A third party. Nick! Now's your time.

NC [Laughs.] It exists, Richard. It's called the Lib Dems. But I take your wider point that the old anchors that tether the way the parties are lined up make no sense any more. I'm 50. The politics I grew up with were the bosses or the workers, high tax or low tax, the public sector or the private sector. The ways people line up now on the big issues - globalisation, immigration, Europe - cuts across party lines completely. So, you have to assume eventually that will produce new alignments. I feel like, over the next few years, there's a high likelihood of that happening.

RT Well, I hope so.